The X-Prize is going to change the world, and in some ways you probably didn't think of.

1. Cheap suborbital space vehicles could be a great boon to the US military, especially with regards to reconnaisance. One X-Prize company, TGV Rockets has strongly promoted this market. A 2002 Aerospace Corporation Report available here says "the ability to fly a high-resolution camera at extremely high altitudes along border regions creates a valuable military asset." These vehicles have several advantages over orbital satellites: they don't tie up communications, they are harder to destroy, and they can be launched on short notice.

2. Once X-Prize vehicles are flying regularly, every single country in the world will be able to afford a suborbital space program. The downside to the US, of course, is that every country will be able to afford a suborbital military force. These superfast vehicles could devastate their targets from hundreds of miles up. Rand Simberg addresses this issue in in this Aug 15 article.

The US military will of course want to be first in this suborbital space initiative. The only question is when will the military strategists be compelled to respond to the threat of potential enemies using suborbital vehicles.

The response at that time most likely means the weaponization of space to protect both military and commercial space-based assets. This is sure to generate intense debate around the world.

The xrpize hasnt changed any of the international ramifications of suborbital flight;
because, no 3rd world country is going to send up people and equipment, they're going to send up missiles.
And, frankly, missiles are pretty damn easy to create, and can be made today without any knowledge we've gained from the X-PRIZE.

The non-US countries represented in the XPRIZE competition are United Kingdom, Canada, Israel, Romania, Argentina, and Russia. All of those countries have significant military organizations, which would want to learn from the lessons of suborbital flight in their country.

It also follows that if any country starts to utilize suborbital flight in its military, then that country's possible enemies may be compelled to pursue or steal that technology.

This may be only 5-10 years away. In the meantime, missile launches are certainly a concern (e.g. former Iraq, N. Korea, Iran, France). Let us always keep our sense of humor. Iraq's missiles are gone.